July 19, 2010 MinutesCITY OF DENTON CITY COUNCIL MINUTES
July 19, 2010
After determining that a quorum was present, the City Council of the City of Denton, Texas
convened in a Special Called Work Session on Monday, July 19, 2010 at 11:36 a.m. in the
Council Work Session Room.
PRESENT: Mayor Burroughs, Council Member Engelbrecht, Council Member Gregory,
Council Member Heggins, Mayor Pro Tem Kamp, Council Member King, and Council Member
Watts.
ABSENT: None.
1. The Council received a report, held a discussion, and gave staff direction
regarding alternatives for transportation and economic development opportunities, which were
currently being discussed in the 81st Interim Legislature and by various regional and statewide
transportation stakeholders.
Lindsey Baker, Assistant to the City Manager, briefed the Council on Transportation
Reinvestment Zones. She stated that this was a preliminary discussion to the upcoming
discussion on August 3 on Tax Increment Finance Zones. She stated that she would also
highlight the funding alternatives that the State Legislature might extend in the 82nd legislative
session to municipalities, counties and other political subdivisions of the state.
Baker stated that the Transportation Reinvestment Zone (TRZ) was created in 2007 by the
Legislature primarily to promote a transportation project in an unproductive or underdeveloped
area. The statute authorized municipalities and counties to dedicate a portion of property tax
revenue to finance highway projects. The language did not currently define the radius of a
proposed zone.
In order to be eligible for a TRZ, a municipality must enter into a pass-through agreement with
TxDOT, which essentially meant that it had to be a state roadway or highway. A city could not
use a TRZ to finance a street project or non-TxDOT roadway project. By entering into a pass
thru agreement, a city-financed highway project would lead, in theory, to economic development
in the area adjacent to the highway and increased property values allowing the city to capture the
incremental tax increase from the property to help fund that project. Also, TxDOT would
reimburse the municipality based on a "per vehicle fee" or a "per vehicle mile fee" that was
determined by the number of vehicles using a highway.
Campbell stated that the intent of the pass thru tolling agreement was that the reimbursement
from the state would be used to off-set the city's debt service cost. It would be dependent upon
usage and volume of traffic and would not pay back 100 percent of costs.
Campbell stated when the TRZ was created, a city determined the baseline of the tax value that
was there at the time. Any value increase that occurred because of new constriction or growth in
value was assumed to have occurred because of the project that was being constricted by the
TRZ and all of the incremental increase in the tax value was accrued to the benefit of the TRZ.
You still maintained what you had at the baseline level prior to the creation of the TRZ.
Baker stated that the Texas Transportation Commission determined the boundaries of the TRZ
and the conditions of the creation of the TRZ.
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July 19, 2010
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Baker stated that the difference between a TRZ Transportation Reinvestment Zone and TIRZ
Tax Increment Reinvestment Zone was that a TIRZ was synonymous with a TIF. With a TRZ,
only the property tax increment could be used. Whereas in a TIF, both the sales tax and property
tax increment could be used.
Baker stated that there was a difference between the TIRZ and the TIF, even though both
provided for tax increment financing for economic development and for roadway constriction in
under-developed areas. The major difference was that the TIF allowed the creating entity to
capture both the local property tax increment and the local sales tax growth increment; and they
could dedicate a portion-all or none-of that incremental tax growth to the designated project.
Current TRZ legislation was such that you had to put forth 100% of the property tax increment
growth. Another difference was that collection of the sales tax increment in a TRZ was not
permitted at this time; only the property tax. One other difference was that within a TIF, the
creating entity could use the dollars to fund infrastructure improvements including sidewalks,
streets, and beautification projects.
Baker stated that back in February the house and senate transportation committees held a hearing
to consider the interim charge of policy implications of Transportation Reinvestment Zones
funded by state sales and use taxes as an alternative to public financing of transportation projects.
The committee discussed a bill that had been proposed but did not pass in 2009 during the 81st
legislature and that was SB 505. SB 505 proposed creating a Transportation Finance Zone or
TFZ. This would actually authorize the Texas Transportation Commission to designate an area
adjacent to a state highway project as a TFZ and could have authorized the use of proceeds from
state sales and use taxes but not property taxes to fund the project. It was not stated if it was the
incremental growth or 100%. They had discussed expanding the scope of the eligible projects to
include all transit related projects, including highways, streets, and rail. They also discussed
possibly extending the use of sales and use tax to a TRZ, in addition to the property tax. The
financing tool would possibly be collection of local sales and use tax, in addition to the local
property tax increment to fund the designated project. The new modified TRZ would still not be
as broad as a TIF in terms of eligible projects such as the infrastructure improvements, lighting,
etc. that could be done in a TIF.
Baker stated that if the legislature proceeded with the TRZ legislation as discussed, there were
many unanswered questions which might pose risks to a municipality's tax base. Only cities and
counties were authorized to create the TRZ and the TIF but there was concern that other political
subdivisions of the state might lobby the legislature to gain that authority.
Baker stated that staff had the following concerns:
1. If another governing body were allowed to form a TRZ within city limits and collect the
local sales and local property tax increment, this would essentially act as a revenue cap limiting
the city's ability to collect those taxes above the base tax rate that was established to measure
that incremental growth.
2. It might be possible that another governing body could be given authority to create a TRZ
that overlapped an existing municipal TIF.
3. It was not clear, that if a TRZ were created by another governing body that overlapped an
existing municipal TIF, if funds that had not been dedicated to the project costs of the designated
TIF could go to the governing body of the overlapping TRZ, reducing the tax base of the TIF
governing body.
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July 19, 2010
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4. The TRZ legislation might be modified to include a 2 mile radius on either side of the
center line of the highway project. If another governing body was given authority to create a
TRZ, they would be able to capture the sales and property tax base within that 2-mile radius.
General consensus of the Council was that staff support all transportation funding options
provided they did not eliminate or reduce municipal authority or revenue sources.
2. The Council received a report, held a discussion and gave staff direction
regarding street maintenance issues.
Jim Coulter, Director of Water Utilities, briefed the council regarding street maintenance issues,
current maintenance activities, and staff recommendations on the changes needed to adequately
operate and maintain the street system. He stated that in 2003 a consultant performed an
automated pavement evaluation. This evaluation gave staff an assessment of the Overall
Condition Index of the City's street network. Based on the analysis of the road condition, the
consultant performed model nuns to determine the level of expenditure necessary to prevent the
deterioration of the City's roadway system. A second automated pavement assessment project
was started in 2009. The consultant was finalizing the analyses to determine the maintenance
activities necessary to prevent the deterioration of the road system.
He stated that there were 1,382 lane miles valued at $383 million currently in Denton. The City
had added an average of 25-30 lane miles per year over the past six years. He stated that initial
constriction to reconstruction was 20 years for asphalt and 35 years for concrete. If we did not
maintain our streets, it would cost (using a 20 year average life-cycle) $383 million over 20
years, which would be $19.15 million per year. This was assuming that 1/20 of the streets were
repaired each year.
The results of the 2008 citizen survey rating city services showed that of the citizens responding,
35% ranked street maintenance as excellent/good and 65% ranked it fair/poor.
Coulter briefed the council on preventative maintenance activities - crack seal, micro-seal, hot-
mix asphalt overlay, and street reconstruction. He stated that pavement distresses included
cracking, base failure, horizontal cracking, and transverse. He stated that pavement distress was
caused by: wheel load - 1 trick equals 9,300 passenger vehicles; environment - weather hot,
dry, wet, freezing; poor drainage; material deficiencies; external causes (utilities - cuts);
expansive soils.
Coulter stated that the current street budget was $4.5 million. It consisted of $2.5 million for
labor and equipment and $1.9 for materials. There were three crews - patching, constriction,
and crack seal/pothole.
Coulter stated that by looking at the 20-year life cycle costs and assuming a cost of $300,000 per
lane mile, it indicated we needed to be spending 20.7 million dollars per year for annual
maintenance. Our current standards for roadway constriction should yield a 35 to 40-year life
cycle. He stated that by increasing the life cycle of our roadways to 35-40 years, the annual
maintenance expenditures could be reduced to $13 to $15 million per year.
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July 19, 2010
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Coulter stated that staff had surveyed other areas of the country that were having funding
problems, and what a number of places were starting to do. They were looking at the roadways
and the roadway usage and in some cases they could not afford to continue to overlay and put
pavement on them, so they were grinding them up and turning them back into gravel. This was
starting to be the trend in how other entities were dealing with budget shortfalls.
Coulter stated that the bottom line was that there was currently $4.5 million in funding right now,
but that needed to be increased up to $18 million per year to get to a level where the overall rate
of our roadways did not continue to decline.
Coulter stated that once they received the final study of the automated pavement project, staff
would review it and bring funding recommendations back to the Council in the fall.
Following the completion of the Work Session, the City Council convened in a Closed Meeting
at 1:05 p.m.
Closed Meeting:
A. Consultation with Attorney - Under Texas Government Code Section 551.071.
Received a briefing from the City's attorneys regarding legal issues related
to parking and speed matters on City streets running through or adjacent to
the University of North Texas and Texas Woman's University. Discuss,
deliberate and provide attorneys with direction. A public discussion of
these matters would clearly conflict with the duty of the City's attorneys to
the governmental body under Texas Disciplinary Rules of Professional
Conduct of the State Bar of Texas.
2. Consultation with the City's attorneys regarding legal issues associated
with board and commission members and conflicts of interest and the
release of confidential information where public discussion associated
with these legal matters would clearly conflict with the duty of the City's
attorneys to the City of Denton and the Denton City Council under the
Texas Disciplinary Rules of Professional Conduct of the State Bar of
Texas.
With no further business, the meeting was adjourned at 2:10 p.m.
MARK A. BURROUGHS
MAYOR
CITY OF DENTON, TEXAS
JANE RICHARDSON
ASSISTANT CITY SECRETARY
CITY OF DENTON, TEXAS